Nike Labor Practices in Vietnam

byVietnam Labor WatchMarch 20, 1997

An Open Letter to Concerned Americans, Nike Shareholders
and Consumers

Enclosed you will find our report on Nike labor practices in Vietnam
and Nike's own corporate statements and promises. This report is the result
of several months of research as well as interviews with 35 Vietnamese
workers from Nike factories in Vietnam. Please do compare what Nike said
to the reality of Nike workers in Vietnam. We, then, urge you to send the
enclosed letters. The first letter is for President Clinton urging him
to ask Nike to provide monetary compensation to workers in Vietnam who
are owed backpay. The second letter is for Nike’s CEO, Mr. Phil Knight,
asking Nike to:

1. Accept proposals by non-governmental organizations
to form independent monitoring boards in each country where Nike shoes
are produced.

2. Adopt a fair living wage practice for all workers,
one that would enable workers to meet basic needs, as well as save for
the future. Nike can use independent studies by academics and NGOs to determine
living wage standards.

3. Promote conditions at Nike factories conducive
to the empowerment of workers. Stop Nike subcontractors from using boot
camp techniques in managing factory workers. Adopt a corporate goal of
having no tolerance for physical abuse, humiliation, corporal punishment
as well as sexual abuse in Nike factories.

4. If Nike agreed with our findings concerning
issues related to its violation of Vietnamese minimum wage law, then Nike
should provide some forms of backpay to its Vietnamese factory workers
to compensate for lost wages that Nike factory workers have endured.

5. Nike should forced all its factories in Vietnam to comply to
the recommendations of the HCM City Health department and Bien Hoa Health
Department.

Nike is a consumer oriented company and will respond to public
pressure. Therefore, your letters to President Clinton and to Mr. Knight
will make a big difference in this effort to improve the daily living conditions
of Nike factory workers in Vietnam, China and Indonesia. Thank you very
much for your help.

This report is the result of a six month effort by Vietnam
Labor Watch (VLW) to understand the working conditions of workers at factories
in Vietnam that make Nike products. The effort was started in October 1996,
after the CBS News program 48 Hours ran a segment detailing the abuse of
Nike workers in Vietnam. A group of Vietnamese Americans, deeply disturbed
by the report, decided to contact labor groups and journalists in Vietnam
to verify the report, to meet with Nike officials to discuss the problems
and to organize a group called Vietnam Labor Watch to monitor the issue
on an ongoing basis.

From March 2-18, 1997, at the invitation of Nike, Vietnam
Labor Watch traveled to Vietnam to visit the factories. We met with workers,
shoe manufacturing executives, labor union officials, union representatives,
legal experts and foreign investment experts in Vietnam. In addition to
the official factory tour of the Sam Yang plant, we did surprise visits
to Sam Yang and three other plants that produce Nike shoes – Pouchen, Dona
Victor and Tae Kwan Vina. We conducted in-depth interviews with 35 Nike
shoe factory workers outside their respective factories.

This study covers the following issues: labor law violations,
wage, working conditions, health and safety practices, and sexual harassment.
The study also compares what Nike told the American consumers about its
labor practices versus what VLW has found in Vietnam.

We are glad that Nike is providing needed jobs in Vietnam,
but we are deeply concerned about the company’s labor practices. Nike contractors
are exploiting the Vietnamese workers in many areas, including wages, working
conditions, health and safety practices. Nike has a fine Code of Conduct
but this Code of Conduct is being violated consistently by Nike contractors
in Vietnam. While Nike claims it is trying to monitor and enforce its Code,
its current approach to monitoring and enforcement is simply not working.

A simple story illustrates this fundamental problem.
On the day we made an official visit with Nike representatives to the Sam
Yang plant in Ho Chi Minh City, we found that the doors to the six factories
of this facility were wide open, as stipulated in the fire codes. However,
on the day, we made a surprise visit to the same facility, we found three
factories had their doors closed, while workers were still working inside.
A small industrial fire in any of these factories could easily lead to
the loss of many lives.

Under the current system, Nike has no way to ensure that
its contractors abide by its Code of Conduct. There are not enough Nike
expatriates or employees in all of Nike’s various departments in Vietnam
to ensure that Nike contractors are complying with the code of conduct
on a day-to-day, shift-to-shift basis. Auditing is also not adequate. Any
visit, audit or study to find out about working conditions through worker
interviews within the confines of the factory will simply be inaccurate.
The workers are under a constant threat of retaliation and would not reveal
their true feelings to anyone while they are inside the factory. To be
accurate, any study or audit must interview workers outside the factory
and must be done by a neutral party who could guarantee the anonymity of
the workers.

We found that Nike subcontractors violated many critical
Vietnamese labor regulations. We found violations of the laws covering
overtime wages, night shift wages, and Sunday wages. We were shown pay
stubs with such irregularities in compensation that they suggest a systematic
form of wage cheating. We found many workers who received below minimum
wage during the first three months of employment, which is another violation
of Vietnamese law. We also found that in 1996, many workers worked over
the legal maximum of 200 hours of overtime per year. In 1997, we already
found several workers working such long hours of overtime that they were
reaching the yearly limit within the first two months of 1997!

Over 90 percent of the Nike workers in Vietnam are women,
and most of them are between the ages of 15 and 28. A uniform complaint
among the women we interviewed was that they were not being paid a livable
wage. The daily wage is approximately $1.60 and the cost of three simple
meals is $2.10 per day. The women told us that they literally have to make
a daily choice between eating a balanced meal or paying rent for the single
rooms that most of them rent out. Ninety percent of the workers we interviewed
told us that they received extra help in terms of finance, food, or housing
from their families to make ends meet. Most of the women are from the countryside,
and all the women we interviewed told us that they cannot afford to save
money to send back home to their families.

The treatment of workers by the factory managers is a
constant source of humiliation. We found that verbal abuse and sexual harassment
are frequent, and corporal punishment is often used. During our two week
visit, 56 women workers at a Nike factory were forced to run around the
factory’s premise because they weren’t wearing regulation shoes. Twelve
of them suffered shock symptoms, fainted during the run and were taken
to the hospital. This deplorable event occurred on International Women’s
Day, an important holiday when Vietnam honors its women. This abuse of
workers reflects Nike’s inability to enforce its Code of Conduct. It took
place during a period when Nike knew that Vietnam Labor Watch was in Vietnam
investigating Nike labor practices. During this same two week period, the
workers at another Nike factory conducted two work stoppages, one of which
lasted for three days.

Several factory rules in place violate sensibilities and
indeed, human dignity. Workers cannot go to the bathroom more than once
per 8-hour shift and they cannot drink water more than twice per shift.
Forced and excessive overtime to meet high quotas is currently the norm
at Nike factories. During January 1997, we found workers who worked over
80 hours of overtime, and in February, which was a short month due to the
national four-day holiday for Lunar New Year, they were forced to work
over 70 hours of overtime.

Many health and safety standards in Vietnam are ignored
by Nike factories. In March 1997, we found that a Nike factory had not
even implemented a single health and safety recommendation from a list
of many made in September 1996 by the Ho Chi Minh City Health Department.
It is a common occurrence to have several workers faint from exhaustion,
heat and poor nutrition during their shifts. We were told that several
workers even coughed up blood before fainting. The medical facilities at
the factories we visited were inadequate. The Sam Yang’s medical facility
is only staffed with two nurses for approximately 6000 employees. There
is only one doctor who works for two hours a day, even though this factory
operates 20 hours per day.

Given the distressing conditions, the relationship between
factory managers and worker is extremely tense. We believe if this antagonistic
relationship continued, there could well be very serious clashes.

VLW believes that Nike can only enforce its code of conducts
for its factories through the use of monetary fine and independent monitoring.
Nike needs to adopt a policy of zero-tolerance for corporal punishment
and physical abuse of its workers just as it has a policy of zero tolerance
for poor quality shoes. Nike can only improve the working conditions at
Nike factories in Vietnam by working with the Vietnam General Confederation
of Labor and the labor union representatives at the factories. Nike also
needs to consult with other shoe manufacturers in Vietnam who have managed
to produce high quality shoes for other US shoe companies while providing
higher wages and offering much better working environment than Nike factories
in Vietnam.

Labor Law Violations

Nike Claims:

1. In the Nike Production Primer, Nike stated that
workers in its factories in Vietnam "can earn triple the wage offered
in state-run factories" (p. 2.8)

2. The first rule of Nike's code of conduct is that "(Subcontractor/supplier)
certifies compliance with all applicable local government regulations regarding
minimum wage; overtime; child labor laws…"

Reality:

Vietnam Labor Watch has obtained actual pay stubs
from 1996 and 1997 that confirm CBS News’ report that Nike violates Vietnamese
laws in regards to minimum wage and forced overtime. In addition, we found
that Nike has violated the training wage provision of Vietnamese labor
law.

CBS news program 48 Hours reported that workers
at Nike shoe manufacturing plants in Vietnam made an average of 20 cents
per hour. Team leaders were making $42 per month, which is less than the
Vietnamese minimum wage of $45 per month. Regular workers made even less.
CBS documented this through interviews with team leaders and even showed
a copy of a labor contract in its broadcast.

We also have obtained pay stubs (exhibit 1 &
2) in which a full-time worker received less than $27 for March and April
1996; the minimum wage in Vietnam at that time was $35. While Nike claims
that this practice has ended, we found pay stubs of other workers who received
less than $38 a month between November 1996 and February 97 (exhibit 3,
4, 5); the minimum wage in Vietnam since July 1996 is $45. All 35 workers
from Nike factories in Vietnam that we interviewed confirmed that they
received a wage lower than the minimum wage for a period of 90 days when
they first started working at the factory. All 35 are not aware that this
was a violation of the minimum wage law.

Nike might claim that new workers are paid a lower wage
because Vietnamese law allows for a training or probationary wage that
is less than the minimum wage. Vietnam's legal code, however, specifies
that the training wage can be paid only for a "probationary period"
of 30 days for jobs requiring high school education and 6 days for jobs
requiring less than high school education (under Article 32 of the Labor
Code of June 23 1994 and Article 5 (2) of Decree 198-CP of Dec 31, 1994).
Of the 35 workers that Vietnam Labor Watch interviewed, only 8 of them
finished high school. In terms of training, the majority of shoe factory
jobs other than stitching and sewing require about one week of training,
according to the workers we interviewed. We also were informed by the Vietnamese
General Confederation of Labor as well as Ho Chi Minh City Confederation
of Labor that the legal definition of training and probationary wage under
the Vietnamese legal code is one and the same.

Nike contractors might also claim that the workers, during
the first three months, are considered students receiving a technical or
vocational education and therefore can be paid below the minimum wage.
We firmly believe that this is just an excuse to squeeze further profits
out of these workers. Nike workers are not receiving a formal technical
education or vocational training. There are no classroom facilities in
the factory and no educational materials are provided to the workers. The
proof that Nike factory jobs require no formal training is the fact that
Nike factories currently employ workers on the assembly lines who only
have a 9th grade education, and new workers are usually immediately placed
on the assembly line after only a few hours of training These "students"
also work many hours of overtime, just like regular workers. If a worker
is good enough to virtually immediately start producing shoes and to work
many hours of overtime, then they should get the wage of a regular employee.

Article 69 of Vietnam's Labor Law stipulates that "The
labor user and the laborer may agree to work overtime, but not for more
than four hours a day, 200 hours a year". Several workers told CBS
News that they are forced to work overtime to meet a daily quota that is
set very high. We have found that on average Nike workers are forced to
work 500+ hours of overtime per year.

Our pay stub records (exhibits 6 to 12) show that one
Nike factory worker worked 238 hours of overtime from April 1996 to October
1996. Exhibits 13 to 17 show that another worker worked 236 hours of overtime
from May 1996 to October 1996. Both of these women work on different assembly
lines, and said they were forced to work this much overtime. Since each
assembly line involved 50 workers, additionally there must be at least
98 other workers who were forced to work over the legal overtime limit.
We found one pay stub indicated that a worker has worked over 73 hours
in February 1997 alone (exhibit 19), and 84 hours of overtime, including
three Sundays, in January 1997 (exhibit 18).

The many irregularities we found in our analysis of pay
stub records suggests a deliberate form of wage cheating. We also received
complaints from workers about not getting the correct compensation for
overtime wages, night shift wages or Sunday wages. According to Vietnamese
labor law, the overtime wage is 1.5 times the regular wage, night shift
wages should be 1.3 times, and Sunday and holiday wages should be twice
the regular wage.

For example, we have two pay stubs for the month of February
1997 from two workers (exhibit 5 and exhibit 19). They told us that during
February, they worked many hours of overtime, including double shift days,
several Sundays, one worked over 100 hours of overtime and the other worked
over 60 hours of overtime. According to these pay stubs, both workers worked
29 days in February, but there are only 28 days in February 1997. During
the month of February, the workers were supposed to have received 4 days
off for the Lunar New Year. Either they did not receive the holidays according
to the law or they did not receive the correct overtime compensation. Another
legal violation is that if they have worked the entire month of February
1997, they must have worked four Sundays but the pay stubs did not indicate
any Sunday hours.

Over 60% of the workers we interviewed complained about
not being paid overtime even when they worked overtime. They told us that
in some parts of the factories, each assembly line is assigned a specific
daily quota, and if the workers do not meet this quota, then they have
to work extra hours until they meet the quota—without getting overtime
pay.

In conclusion, Nike factories violate many labor laws
in Vietnam, including the provisions regarding minimum wage (Article 3
of Decree 198-CP of December 31, 1994, Section II. (1.) of Circular 11/LDTBXH-TT
of May 03 1996), provisions regarding probationary period (Article 28 of
the Labor Code and Article 5 (4.) of Decree 198-CP), in addition to the
above-cited provision regarding the overtime limit.

Workers cannot live on Nike factory wages

Nike Claims

1. Nike has agreed to "…only do business with partners
whose workers are all cases employed voluntarily, not put at risk of physical
harm, fairly compensated…, and not exploited in any way." (Athletic
Footwear Association's Statement of Guidelines on Practices of Business
Partners, signed by Nike, 3/93)

Reality

The 35 workers we interviewed told us that they cannot
live on the basic factory wage, which is the equivalent of $47US per month.
It is simple math, they said. A simple, basic meal (like rice, vegetables
and some tofu) costs 70 cents; three meals a day costs $2.10. They are
paid about $1.60 per day. So the basic salary they receive from Nike factory
jobs does not even cover the cost of food. Then there are other expenses:
renting a room ($6 per month), clothing, soap, toothpaste etc. They also
do not receive the full $47 wage, because there are deductions for health
insurance, social insurance and meals from their paycheck.

All 35 workers told us that they receive some financial
assistance to make ends meet from parents or relatives in terms of housing,
money and food. They were surprised that the cost of living in Ho Chi Minh
City is so much higher than in the rural areas where they came from and
they were not prepared for city life.

All 35 workers we interviewed confirmed that they do
not send any money home to their parents in the rural areas of Vietnam.
They were quite surprised that we even asked such a question. They all
felt that there is no way any of them could save enough money to send home
unless they stopped eating for a couple of days per week.

How do they currently manage with the salary from Nike
factory jobs? They skipped meals. When they eat, they only eat rice and
vegetables. And a couple of times a month, they get help from their parents
or relatives in terms of gifts such as money, rice, chicken, eggs and fish.

Thirty-two out of 35 workers we interviewed told us that
they had lost weight since working at Nike factories. All reported not
feeling good generally since working at the factories. They complained
of frequent headaches as well as general fatigue.

The economic statistics released from the World Bank
confirmed the reality facing these workers. The GDP for Ho Chi Minh City
was $925 for 1995. Considering that Nike factory workers only make about
$564 per year, it is not surprising that they are having trouble making
ends meet.

Boot Camp Assembly Lines

Nike Claims

1. Nike has agreed to "…only do business with partners
whose workers are all cases employed voluntarily, not put at risk of physical
harm, fairly compensated, allowed the right of free association and not
exploited in any way." (Athletic Footwear Association's Statement
of Guidelines on Practices of Business Partners, signed by Nike, 3/93)

2. Nike claims that it has employees on site daily at
the factory and enforced the Memorandum of Understanding. (Nike Production
Primer, Nike Consumer Affair, 1996)

We had a situation that got some publicity more in
Asia maybe than in the United States, where we had a -- a stitching room
floor lady, a Korean floor lady in -- in one of the Vietnamese factories,
you know, hit a Vietnamese stitcher on the -- on the arm with an upper.
And an incident was made out of that.

The -- The Korean floor lady was sent back to Korea
and doesn't work in that factory anymore. It's basically an enforcement
of our (quote) "conduct."

Reality:

We believe that the incidents of worker abuse found at
Nike factories in Vietnam are not isolated incidents but are caused by
the "boot camp assembly line" system in which workers are subjected
to various forms of corporal punishment. Corporal punishment, including
humiliation, is employed as a form of worker control by Nike contractors
in Vietnam. This tactic is current employed in other Nike factories in
Indonesia and Southern China. The "boot camp assembly line" is
a method of controlling workers similar to those used in boot camps of
military institutions to train new recruits. The only difference is that
these young women have no idea that they were signing up for boot camp
when they agreed to work for a Nike factory. Coming mostly from rural areas
of Vietnam, they are not educated and are not familiar with their labor
rights.

Fifteen Vietnamese women told CBS News and other Vietnamese
newspapers that they were hit over the head by their supervisor for poor
sewing at Nike Sam Yang’s facility; two were later sent to the hospital.
At Nike’s Tae Kwan Vina facility, women were forced by their supervisors
to kneel down with their hands up in the air for 25 minutes . A supervisor
also taped the mouth of several workers for talking during work. Throughout
1996, we found many incidents of corporal punishment at Nike factories
reported by Vietnamese newspapers, i.e. forcing workers to stand in the
sun (sun-drying), writing down their mistakes over and over again like
parochial school children, cleaning the toilet and sweeping factory floors.

Despite the many employees that Nike claims are at the
factory sites in Vietnam, Mr. Knight did not present the correct information
about these incidents to shareholders at the Nike shareholders meeting.
If Mr. Knight had just consulted the Vietnamese newspapers, he would have
had a more accurate picture. For example, the headline story in The Worker
newspaper on March 31, 1996 proclaimed, "Foreign Technician Strikes
15 Vietnamese Workers." The same newspaper, on April 1, 1996,
proclaimed: At Sam Yang Company, Cu Chi District, Ho Chi Minh City , Korean
Technical Employee Strikes Many Vietnamese Female Workers. It went on to
say that immediately after the incident took place, 970 workers on strike
to protest the mistreatment of their fellow workers.

On Nov. 26, 1996, 100 workers at the Pouchen factory,
a Nike facility in Dong Nai, were forced to stand in the sun for an hour
over lunch because one worker had spilled a tray of fruit on an altar.
After 18 minutes, one employee (Nguyen Minh Tri) refused to remain in the
sun and walked away; he was then formally fired. Mr. Nguyen Minh Tri was
reinstated after intervention by Nike management and the local labor federation
officials. The three supervisors who abused the workers are still working
at this factory. These supervisors must be severely reprimanded or fired
(exhibit 20).

The use of corporal punishment continued even during
our Vietnam visit. On March 8, 1997, International Women Day, a supervisor
at the Nike Pouchen’s facility in Dong Nai forced 56 women workers to run
around the factory in the hot sun (exhibit 21). Eleven of them suffered
shock symptoms and fainted, one became unconscious. All 12 were taken to
the hospital by other factory workers. The People’s Committee of Dong Nai
has asked the police to hold the supervisor, Hsu Jui Yun, and to investigate
the matter further. Vietnamese all over the country were outraged that
on the International Women’s Day, when most companies in Vietnam give women
workers flowers and other gifts, 12 Vietnamese women were so abused that
they have to spend the day in the emergency room.

Even with all the publicity about abuse of women workers
at Nike factories, Nike has not put an end to the use of corporal punishment
in its boot camp assembly lines. Therefore, we have no choice but to conclude
that the current monitoring system is woefully inadequate. Just from examining
the Nike departments in Vietnam, we could see that no matter how well intentioned
these expatriates were, they could not be in all five factory facilities,
which have eight to nine factories in each facility. These factories also
run night shifts, a time when Nike expatriates are rarely present.

This method of boot camp assembly line creates an extremely
tense atmosphere at the Nike factories. Strikes, work stoppages and work
slowdown occur frequently. During a one week period, when Vietnam Labor
Watch representatives were in Vietnam, one work stoppage occurred on 03/06/97
and another on 03/10/97. There were also several work slowdowns in February
1997 (exhibit 22). The reasons for these strikes or work stoppages are
disputes about overtime pay, arbitrary firing of workers, and abusive treatment.

Verbal abuse is common. One worker recalled a story when
a supervisor told the entire line how his dog in Korea could be trained
better in one year than all the Vietnamese workers on the line. One worker,
when asked how they were treated in Nike factories, said, "They treat
us like animals."

Basic principles of human dignity are being violated
at Nike factories. The workers we interviewed all complained about not
being allowed to drink water more than twice per 8 hour shift or go to
the bathroom more than once per shift. If they violate this rule, they
are given a warning and after three warnings, they can be dismissed. Drinking
water and using the toilet facility is controlled by a card or hat system.
In order to use the facility, the supervisor must first assign a card or
a hat to a worker. Wearing the hat or carrying the card, the worker is
allowed to go. However, the number of cards or hats are limited per assembly
line to 3 cards for 78-person line, 4 cards for a 300-person line.

Based on interviews with workers, Nike factory workers
have no choice but to work overtime. If they refuse, they will be punished
(using the various forms of corporal punishment that we have discussed
earlier) or received a warning. After three warnings, they’ll be fired.
Only in a family emergency (major illness or death) are workers be allowed
to skip the mandatory overtime.

The workers we interviewed are afraid of retaliation
from Nike contractors if they are known to make complaints about the factory
management. The workers told us that people are being fired without any
reason and without the presence of their union representative. During the
last strike at Sam Yang factory in October 1996, all mechanics were fired.
Several workers were also fired and under pressure, were later hired back.
During a work slowdown between March 10-12, 1997, the whole line was fired
and then rehired.

The workers also told us that the factory management
prepared the factory and warned the workers when there were visitors from
the United States or Europe. Workers are too afraid of retaliation to express
their true feelings to these visitors. During such a factory visit, workers
are allowed to work slower and verbal abuse or other forms of corporal
punishment do not occur. But when the visitors leave, things go back to
the normal, miserable conditions. When VLW made a visit to a Nike facility
in Ho Chi Minh City with a Nike representative, we found that the doors
to all the factories were open, as stipulated by law. But on our subsequent,
surprise visit to the same facility, several factories have their doors
closed with workers inside, constituting a serious fire hazard.

Based on our experiences, we believe that any visit,
study or audit using interviews of workers within the confines of the factory
will not be accurate. To be valid, the worker interviews must be done outside
the factory by people who can guarantee workers their anonymity.

Health and Safety Problems

Nike Claims

1. Nike has agreed to "…only do business with partners
whose workers are all cases employed voluntarily, not put at risk of physical
harm, fairly compensated, allowed the right of free association and not
exploited in any way." (Athletic Footwear Association's Statement
of Guidelines on Practices of Business Partners, signed by Nike, 3/93)

Reality:

Working in an environment with the threats of corporal
punishment, fear of retaliation and excessive overtime is debilitating
to the workers. Workers we interviewed complained about weight loss and
general fatigue. In general, they are in poor health. We can easily see
the reasons. Working on a Nike assembly line is a stressful job: workers
must keep up an inhuman pace and on top of that they have to worry about
potential corporal punishment or verbal abuse when they slow down. The
hours are long: many factory workers work 11 hours a day, six days a week,
and sometimes have to work on Sundays as well. Pay stub records reflect
that it is common for workers to put in 40 to 50 hours of overtime per
month. During February 1997 the month of the Lunar New Year, a major holiday
in Vietnam when workers get 4 days off, we found pay stubs in which a worker
worked over 70 hours of overtime (exhibit 19).

Workers fainted often while working in Nike factories
in Vietnam. About three incidents of fainting occur per day. The union
representative told us that he witnessed one worker cough up blood and
faint while working on the assembly line. All 35 workers we interviewed
confirmed that at least once a week they saw or heard about someone who
fainted while working in the factory. As to the reasons, they attributed
them to stress, exhaustion, heat, the smell of chemical (glue, paint) in
the factory as well as people not eating to save extra money.

We obtained a report dated September 9, 1996 from the
Ho Chi Minh City Health Department which describes problems at Sam Yang,
a Nike facility. The major problem is that many areas of the factory have
a high concentration of toluene, reaching a level of 180 mg per sq. meter
when the legal limit is 100 mg per sq. meter. The noise level in several
area were found to be much higher than the legal limit. The report also
provided many recommendations to ameliorate these problems. As of March
12, 1997, the Sam Yang factory management did not implement any of the
recommendations in this report. We also found that the factory management
ignore recommendations made by Nike’s labor practice department, such as
the recommendation that they leave factory doors open in case of fire.

The medical facility at the factories we visited were
inadequate. The Sam Yang medical facility is only staffed with two nurses
for about 6000 employees. There is only one doctor, who is available for
only two hours a day, while this factory operates 20 hours a day. We were
told that the factory management did not want to spend the money to hire
a full-time doctor. Workers during the night shift complain about having
to go to the hospital about 30 minutes away for medical emergencies such
as electric shocks, loss of finger nails, or severe cuts in their hand
and fingers.

2. At the shareholder meeting on Sept 16, 1996, Nike CEO
Phil Knight also commented on a report of sexual abuse at Nike factories
in Vietnam. This is what Mr. Knight said (from transcript of Nike shareholders
meeting),

Fairly recently in Vietnam, that basically there was
a situation on the night shift where four of the woman th-- who were in
the stitching fell asleep. And -- and the night watchman who again was
Korean in coming through the room, two of them woke up and fled the room.
And he shock the other two. And in the shaking of one of 'em, there was
perhaps some misappropriate behavior. And then he touched a part that he
should not have.

That basically she protested. And -- and basically,
it comes about as close as you can get to sexual harassment in U.S. terms,
as you can get. The night watchman was sent back to Korea. And - essentially,
trying to rectify the situation. However, it was reported in one of the
Vietnam -- at least one of the Vietnamese newspaper as a rape.

Reality:

A Nike plant supervisor fled Vietnam after he was accused
of sexually molesting several women workers. The Nike expatriates who were
at the factory daily did not try to make the supervisor stay in Vietnam
to face criminal charges. The government of Vietnam later instigated extradition
procedures against the supervisor.

Once again Nike CEO still did not have or did not present
the correct information about these incidents to Nike shareholders. From
The Worker newspaper, Nguoi Lao Dong, August 23, 1996.

At 4:40 am on the morning of August 18, 1996, Kim Sung
Rat went to inspect passing an area where there were four Vietnamese female
workers working in the computer embroidery room. Kim Sung Rat let two of
the workers take a break and called the other two female workers, NTH and
NTVP, to come to the storage area at the farthest end of the factory where
there was no one working, about 50 meters away from the computer room.
Here Kim Sung Rat called NTVP into the storage area and made a gesture
that she should take off her shirt. After that, Rat tore the shirt of P
and felt her up. P ferociously resisted, and was able to run and escape.

At that moment Rat grabbed a hand and pulled H into the
room. Again with a very obscene action, he rubbed her chest, pulls the
pants zipper of H, and rubbed her private parts. After that, Rat made a
sign by his finger in a very obscene manner indicating sexual intercourse.
Although weaker than P, and being unable to escape nevertheless, H ferociously
resisted. Being able to guess the activity or Rat in the storage room,
as he had done with her, Miss P had run to call the guards, and R was caught
in the act.

There are many problems with Nike using its own expatriates
to try to clean up problems in the factories. Besides not having the correct
information, the on-site expatriates at the factories in Vietnam have not
prevented the contractors from engaging in unethical and probably illegal
behavior. Nike subcontractor, Taekwang Vina, has offered bribes to the
two female workers, asking them to keep quiet. From The Worker newspaper,
Nguoi Lao Dong - August 25, 1996 (excerpts of an interview with
the victims)

Questioner: (to NTH) Can you tell us, after this
took place, on the side of the company, what was their manner?

NTH.After this took place, the leadership of
the company put forth their "separate condition" with me and
P. The company agreed to compensate us in order to smooth over this matter.
Two times they gave to me and to P, each of us, an envelope full of money
in order to buy us off and smooth over the action of this expert Kim. But
we refused. I answered them, we will not for money sell our dignity or
our honor.

Nike factory workers in Vietnam we interviewed all complained
about frequent sexual harassment from foreign supervisors while working
on the assembly line. In broad daylight, in front of other workers, these
supervisors would try to touch, rub or grab the buttocks or chest areas
of these women. Those women who are considered particularly good looking
are frequent targets of sexual harassment. One supervisor even told a female
factory worker that it is a common custom for Korean men to greet women
they like by grabbing their behinds.

Other Shoe Factories
In Vietnam

For comparative purpose, we also interviewed 25 workers
at two other shoe manufacturing companies in Vietnam: Thai Binh and Hiep
Hung. Thai Binh is privately owned and Hiep Hung is a state enterprise.
Both of these companies are currently producing shoes for Reebok, as well
as other European shoe companies. Both are employing from 4000 to 6000
workers each. We found that the working conditions and even the wages are
better than those found in Nike factories. The Thai Binh factory is in
Song Be province, which has a lower minimum wage than Ho Chi Minh City.
Yet the factory workers there receive a higher wage than those in Nike
factories.

Just from a few visits, it is easy to see the difference
in treatment of workers as soon as one walks into these factories. The
workers smile at the guests; they are working but they are relaxed, while
workers in Nike factories are tense, sheepishly looking at the guests.
At Thai Binh and Hiep Hung factories, several workers started conversations
with us when we walked through the factory floor. At Nike factories, the
workers did not even want to sit next to us during lunch.

During lunch at Thai Binh, workers and managers all share
the same table, talking and eating. At Nike factories, the managers have
a separate dining room. At the end of the shift, one can also see another
major difference in treatment of workers. At Thai Binh, the workers simply
walked their bikes and packages out of the factory. At Nike’s factory Sam
Yang, the workers are searched if they carry any bags because the factory
management does not trust its own employees .

In terms of wages, both of these Vietnamese shoe factories
offered higher pay than Nike factories. Thai Binh, in Song Be district
(a lower minimum wage than Ho Chi Minh), offered $52 US per month. At Hiep
Hung, the entry level wage is $65 US per month.

Nike Labor Practices in the
News

In the June '96 issue of Life Magazine, Sydney Schanberg
(author of The Killing Fields) documented child labor being used in Pakistan
in the production of Nike soccer balls -- for 60 cents a day.

The March 16 edition of the New York Times carried a
story on union busting by Nike shoe contractors in Indonesia. One worker
was "locked in a room at the plant and interrogated for seven days
by the military, which demanded to know more about his labor activities."

The October 17 edition of the CBS program 48 Hours had
a segment on Nike's labor rights abuses in Vietnam, including: beatings,
sexual harassment and forcing workers to kneel for extended periods with
their arms held in the air.

On November 3, an article by Australian labor scholar
Anita Chan was published in the Washington Post. She described Chinese
shoe factories -- producing for Nike and other companies -- where supervisors
submit workers to a military boot camp style of control.

On March 14 1997, Reuters had a report on a Nike factory,
Pouchen in Dong Nai, forced 56 Vietnamese women workers to run around the
factory’s premise, 12 fainted and were taken to the hospital emergency
room.

Recommendations to Nike

Vietnam Labor Watch firmly believes that a modern, high-tech
shoe factory can—and must—be managed without practices that are exploitative
and abusive to factory workers. Corporal punishment and severe disciplinary
measures should not be necessary to produce high-quality shoes. Labor practices
of the 19th century should no longer be tolerated at the end of the 20th
century, especially by a U.S. corporation that claims the moral high ground,
projects a progressive image, and is extremely wealthy.

We believe that Nike is willing to change its practices,
and we also believe that Nike has the power to make its contractors rectify
their labor practices. In a spirit of cooperation, so that we can improve
the daily lives of the workers, we recommend that Nike take the following
steps in Vietnam:

Nike should abandon the practice of using training/probationary
wages or paying the workers below minimum wage under the guise of providing
technical/vocational training. Many Nike factory jobs do not qualify as
technical vocations and the current Nike factories cannot be considered
vocational schools. Using this approach to underpay Nike workers is illegal
and unethical. Wages in Vietnam are already at rock bottom. There is no
need for Nike to pay workers any lower than the $45 monthly minimum wage.

Nike should make the implementation of its Code of Conduct
a top priority, putting it above even quality and cost. Once the situation
improves, then Nike can shift this priority. Nike should demand that all
managers who use corporal punishment or are guilty of sexual harassment
be dismissed. Nike should make it the responsibility of the general manager
of the factory to run a factory that respects its workers. After three
violations of Nike’s Code, the general manger should be dismissed. The
current approach of having no specific punishment for violating the Code
of Conduct generates the impression that the Code has no teeth.

Nike should levy a stiff monetary penalty on the contracting
company whenever it violates the Code of Conduct. The current practice
of not making the subcontracting company responsible for its managers’
treatment of workers will only encourage further violations. Companies
tend to respond well to severe monetary fines. With so many repeated violations
after only 18 months of operation in Vietnam, this is the only course of
action left to demonstrate to outsiders that Nike is serious about enforcing
its Code of Conduct.

Nike should immediately enforce the 60 hour work week
specified in the Code. The current practice of excessive, forced overtime
(sometimes over 70 hours per month) would be considered abusive by any
standards.

Nike should be a good corporate citizen in Vietnam. Nike
cannot assume that creating low paying jobs is good enough. Vietnamese
workers—and their supporters around the world—will not simply be grateful
for the jobs and ignore the deplorable labor practices in the factories.
Moreover, it is unjust that Nike shareholders profit handsomely from the
low wages paid these Vietnamese workers. Nike should take some of the profits
it makes from Vietnamese workers and invest them in projects that help
improve the lives of poor Vietnamese.

Nike should work directly with the Vietnam General Confederation
of Labor to hear the complaints from workers and to talk with workers outside
the factory environment. We found that as long as the workers remain within
the confines of the factory, they are very fearful and are not willing
to talk about their conditions to anyone. The Vietnam General Confederation
of Labor at both the local and district levels were very helpful to us
in arranging meetings with factory workers outside factories. We believe
that the Confederation could be an important addition to Nike’s efforts
to improve its labor practices.

Nike should consult with several Vietnamese who are experts
in shoe factories and on how to establish better labor practices. Beside
Nike factories, we had an opportunity to visit two other shoe factories
in Vietnam: Thai Binh and Hiep Hung. Both are Vietnamese companies and
both are producing high-quality shoes for Western shoe companies such as
Reebok and Fila. The presidents of both of these companies have expressed
their willingness to consult with Nike on how to treat its Vietnamese workers.
Even though they consider Nike a competitor, both of these managers are
willing to help because they want to improve the working conditions of
the workers at the Nike factories. Their desire to help is sincere and
generous, and we believe that Nike should take them up on their offer.

Nike should form an independent monitoring board in Vietnam
consisting of representatives from neutral parties, including government
labor officials, NGOs, and labor unions There are many excellent organizations,
as well as respected individuals, who would be willing to serve on such
a board.

Nike should immediately implement all of the recommendations
made by Vietnam’s Health Department to improve the health and safety conditions
at Nike factories.

Nike should implement all of the recommendations made
by Ho Chi Minh City’s General Confederation of Labor, which include: classes
on labor rights for workers, regular medical examination for workers, and
establishing a pay scale that is fair and abides by Vietnamese labor law.

Exhibit 1

Exhibit 2

Exhibits 1 & 2 combines together demonstrate that
Nike’s subcontractor, Samyang Vietnam Co., Ltd violated the minimum wage
law of Vietnam. The minimum wage in Vietnam for the period of March and
April 1996 is $35 USD or 387,000 dong (VND). These two exhibits demonstrate
that this worker, employee no. 6032, received a wage 271,000 VND for 32
days. According to Vietnamese law, Nike subcontractor can pay a wage that
is less than the minimum wage for a trial period of 6 days. Therefore,
Nike factory definitely owed at least 26 days of backpay to this worker.

Additionally, Exhibit 1 shows that employee 6032 worked
4 hours of overtime for March 1996 and Exhibit 2 shows that the same employee
worked 20 hours of overtime for April 1996.

Exhibit 3, 4 & 5 also demonstrate that Nike’s subcontractor,
Sam Yang Vietnam Co, Ltd. violated the minimum wage law of Vietnam for
the month of November, December 1996 and February 1997. These three exhibits
show that employee no 6111 received a wage of 387,000 VND for 3 months.
VLW could not obtain a paystub for Jan 1997., nevertheless we can easily
assume that this worker received the same wage as December 1996. The minimum
wage in Vietnam since July 1996 is $45 USD.

Exhibit 3

Exhibit 3 demonstrates that in Nov. 1996, employee 6111
received a basic salary of 387,000 VND which is below the minimum wage
of Vietnam ($45).

Exhibit 4

Exhibit 4 demonstrates that in Dec. 1996, employee 6111
received a basic salary of 387,000 VND which is below the minimum wage
of Vietnam ($45 USD).

Exhibit 5

Exhibit 5 demonstrates that in Feb 1997, employee 6111
received a salary of 387,000 VND for 16 days of work which is below the
minimum wage of Vietnam ($45 USD). There are other irregularities with
this paystub. Please refer to exhibit 19 for explanation.

Exhibit 6

Exhibit 6 shows that employee 6032 worked 40 hours of
overtime in May 1996.

Exhibit 7

Exhibit 7 shows that employee 6032 worked 36 hours of
overtime in June 1996.

Exhibit 8

Exhibit 8 shows that employee 6032 worked 31 hours of
overtime in July 1996.

Exhibit 9

Exhibit 9 shows that employee 6032 worked 53 hours of
overtime in August 1996.

Exhibit 10

Exhibit 10 shows that employee 6032 worked 29 hours of
overtime in September 1996.

Exhibit 11

Exhibit 11 shows that employee 6032 worked 21 hours of
overtime in October 1996.

Exhibit 12

Exhibit 12-17 shows that employee 5101 worked 236.5 hours
of overtime from May 1996 to October 1996. The Vietnamese legal limit of
overtime is 200 hours per year.

Exhibit 13

Exhibit 13 shows that employee 5101 worked 36 hours of
overtime in June 1996.

Exhibit 14

Exhibit 14 shows that employee 5101 worked 31 hours of
overtime in July 1996.

Exhibit 15

Exhibit 15 shows that employee 5101 worked 55 hours of
overtime in August 1996.

Exhibit 16

Exhibit 16 shows that employee 5101 worked 31 hours of
overtime in September 1996.

Exhibit 17

Exhibit 17 shows that employee 5101 worked 39.5 hours
of overtime in October 1996.

Exhibit 19 and exhibit 5 have many irregularities suggesting
a systematic form of wage cheating. Both paystubs indicate that both employees
worked 29 days in February 1997 but there were only 28 days in February
1997. If the workers have worked for the entire month of February, then
they must have worked 4 Sundays, yet the paystubs indicate that they did
not receive any Sunday pay (2 times the basic salary). If the workers have
worked two shifts on some days, then the second shift should be compensated
as overtime pay and not as night-shift pay. Overtime pay is higher, 1.5
times the basic salary, than night shift pay, 1.3 times the basic salary.

In February, there is a 4 day national holiday for the
Lunar New Year. If the workers have worked during the holidays, they did
not receive holiday pay which is 2 times the basic salary. The worker in
exhibit 19 insisted that she got 4 days off for the Lunar New Year, and
she worked at least 100 hours of overtime including several Sundays, and
several days of double shifts. Exhibit 19 indicates that she only worked
73 hours of overtime.

Exhibit 18 and 19 together demonstrates that this one
worker has already worked over 157 hours of overtime during the first two
months of 1997. The maximum overtime limit for Vietnam is 200 hours per
year. After two months in February 1997, this worker is reaching the legal
maximum limit.

3 Taiwanese technical experts punished about 100 employees
by forcing them to stand in the sun during lunch

Exactly at 12 noon, 11/26/1996, during the process of
punching lunch tickets, it was not sure who but someone accidentally spilled
a tray on the altar to commemorate October 16th, Lunar calendar.
No one admitted to the mistake, afraid of being fired, 3 Taiwanese technical
experts: Hoang, Trinh and Ky forced the entire group of Vietnamese workers
(approximately 100 workers of in the construction crew) to stand in the
sun (sun-drying) for 20 minutes, including workers who were getting ready
to eat lunch.

Refusing to accept this kind of humiliating punishment,
after 17 minutes, Mr. Nguyen Minh Tri (a worker in the construction crew)
expressed his objection to the indignity. Immediately Mr. Tri employee
card was taken and he was fired at 3 pm.

The labor officials at Dong Nai is still trying to clarify
the matter. PV

Exhibit 21

Translation:

Nguoi Lao Dong (The Worker), March 12, 1997, Page 2

Pouchen Co. (Dong Nai)

Punish women workers to run 4 km

70 women workers were punished, 12 fainted on the spot.
Ms. Hsu Jui Yun was held by authority. President of Confederation of Labor
in Dong Nai proposed: this situation must be judged according to the law.